Of course there is. If you think that there is a 10% chance you might go to prison for life (for some crime), and the DA offers you a six month sentence, with a significant chance to be served as house arrest, then it might make a lot of sense to take the plea.
False convictions happen. So now it's just a question of taking the known cost now, or a gamble on a much higher cost after the trial.
This gives the DA an incentive to try to go for more false convictions since it will be a bigger stick to hold over future defendants. If false convictions had low incidence then innocent people would go to trial more often.
It gives the DA an incentive to apply any charges that might possibly stick because it increases the likelihood of a plea deal by shifting the perceived risk to the accused. This is absolutely a bad situation, but presumably the DAs aren't amoral monsters who are deliberately trying to falsely convict people. :)
This is exactly the problem though - everything about the concept of "applying whatever charges that may stick" sounds predatory.
Being thrown charges until something sticks is akin to being interrogated until something / anything damning is found against you - an inquisition.
It's not shifting perceived risk, it's shifting real risk. If you're not charged for something, you're probably (right? correct me if I'm wrong?) not going to get convicted for it. If you /are/ charged for something, there's a chance you're going to get convicted for it.
Terrible things don't mostly happen because people are monsters, they happen because people are apathetic to others' problems and value their own convenience and gain above all else.
You could also argue, the DA would avoid uncertain cases. That is the common wisdom in the legal community about federal prosecution. They only make a move when they are totally certain they can get a win.
Can't speak to local DAs in bumfuck eygpt. Maybe they are trying to avoid losing by any means necessary.
To the contrary. This isn't an uncertain case, and it proves the rule that prosecutors go after easy, sure cases. Here, you've got eight employees of a small bank admitting to originating false loans.
The employees in question were highly placed: "The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung 'Raymond' Tam, the loan origination supervisor, who trained the bank’s loan officers and processors."
This isn't a case where you have to connect a chain of events between a third-world branch of a megabank all the way to someone who matters. It's neat and self-contained, and easy for a jury to understand.
I'm not sure we're reading the same article. The 'neat and self contained case that was easy for a jury to understand' fell apart completely.
And the bank is (fortunately) wealthy enough to defend itself. That of course did not stop the prosecutor from going after the employees.
Really. Bank discovers internal fraud, goes after the main perpetrator who then turns star witness for the prosecution. It's a giant mess with the prosecutors having considerable egg on their face.
What are the chances that if the individuals could muster the same legal firepower that the bank has that the case against them would also fall apart?
The relevant sentence in the article is:
"Facing indictment and the threat of long prison sentences, eight Abacus loan department employees entered guilty pleas and agreed to cooperate with the district attorney’s investigation."
So according to the article it was the threat of long prison sentences that caused them to enter guilty pleas, not that they were in any way found guilty after a trial.
In short: there was no trial, so whether or not the case against them would fall apart if there had been remains to be seen.
But the article strongly suggests that the main culprit set up underlings to defer to his higher authority. That makes them a lot less culpable than the indictment would make you believe.
Whether the case ultimately panned out does not change the a priori evaluation of the case. It's better to have a do-gooder whistleblower than malfeasant employee looking for a plea deal as your star witness, but even that is better than trying to build a case just out of circumstantial evidence, which is what they had against e.g. HSBC.
If anything, the prosecutor's loss highlights why prosecutors haven't gone after the big banks. If they can't even get a conviction with multiple loan department employees pleading guilty and testifying on behalf of the prosecution, imagine going after a big bank, where the link between the wrongdoing and the central command will be far more tenuous.
I find it very hard to find fault with the bank here. It appears that a single loan officer made illegal moves and upon first discovery the bank did what they could to both contain the issue and notify the authorities.
The malfeasant employee seems to have joined the prosecution against the bank only to relieve the pressure on himself and to distract attention (when in my opinion he should have been the one charged and the bank should have been commended on their handling of the case).
The other employees may have been negligent but do not appear to be malicious, if it wasn't for the alert eye of the director this could have gone on for a lot longer.
All in all this case seems to be a net loss for everybody.
What HSBC did went - as far as we can see from the outside - right to the top and required a lot more than a rogue employee.
It does not look like a single "rogue employee" but multiple employees in the department. Of course that doesn't mean anyone at the top is to blame, but one can see why the prosecutor would draw that inference.
> What HSBC did went - as far as we can see from the outside - right to the top and required a lot more than a rogue employee.
What about HSBC went to the top? The only thing from the indictment that was a policy from the top was not classifying Mexico as a "high risk" country for money laundering controls purposes. There wasn't even a "single loan officer . . . [who] joined the prosecution against the bank only to relieve the pressure on himself" willing to testify that a higher up made that classification decision with specific intent to profit from money laundering.
If there had been a witness like Mr. Yu in the HSBC case, the government would've settled for a lot more than it did.
I suspect the real reason is the quote at the bottom of the page:
"Vance — and by extension, New York’s entire state and federal regulatory regime — gain credibility for their tough stance against an allegedly sketchy institution. The mere indictment builds political capital, regardless of whether there’s any factual basis for their claims."
In other words: this case was brought to Enhance Vance's stature, not because of the gravity of the case.
Yu's supervisor was as far as I understand the case the only other person that should have faced charges, the rest is either operating on instruction from Yu or simply did not know about it and did the right thing once the situation came to light.
Yu's supervisor should have probably caught this in an earlier stage, it went on for too long.
Sadly, yes. Trials can be ruinously expensive even if you win. 97% of federal criminal prosecutions end in plea bargaining [0]. Prosecutors often make offers that are coercive. Consider the Aaron Swartz case [1]. After his death the prosecutor released a statement saying that they would have recommended to the judge 6 months in jail. While they were trying to secure a plea bargain they said he faced up to 35 years in jail and a $1 million fine.
Quoted from the Forbes article:
> If Ortiz thought Swartz only deserved to spend 6 months in jail, why did she charge him with crimes carrying a maximum penalty of 50 years? It’s a common way of gaining leverage during plea bargaining. Had Swartz chosen to plead not guilty, the offer of six months in jail would have evaporated. Upon conviction, prosecutors likely would have sought the maximum penalty available under the law. And while the judge would have been unlikely to sentence him to the full 50 years, it’s not hard to imagine him being sentenced to 10 years.
> In this hypothetical scenario, those 10 years in prison would, practically speaking, have consisted of six months for his original crime (the sentence Ortiz actually thought he deserved) plus a nine-and-a-half-year prison term for exercising his constitutional right to a trial.
Anyone who has ever dealt with federal criminal law would know that the 35-50 years was BS.
There are federal sentencing guidelines, which are almost always used. It's a matrix and you can know pretty much what you face if you are found guilty.
It's also not correct to label a plea deal as what the prosecution thought they deserved. They factor in the cost of trial and probability of success. It's like any negotiation.
Most people have not dealt with federal criminal law. Yes, a good lawyer should be able to help interpret where things truly stand, but that does not absolve prosecutors acting in a coercive fashion to secure convictions.
It's true that a plea deal is not what the prosecution `thought they deserved'. Too often, it's whatever they think that can get the defendant to agree to, and has little connection to justice.
The particulars of the Swartz case were meant to be indicative of the larger problem, and he certainly had access to good legal counsel. Nevertheless, that 6 months quote comes from the prosecutors press release [0]:
> The prosecutors recognized that there was no evidence against Mr. Swartz indicating that he committed his acts for personal financial gain, and they recognized that his conduct – while a violation of the law – did not warrant the severe punishments authorized by Congress and called for by the Sentencing Guidelines in appropriate cases. That is why in the discussions with his counsel about a resolution of the case this office sought an appropriate sentence that matched the alleged conduct – a sentence that we would recommend to the judge of six months in a low security setting. While at the same time, his defense counsel would have been free to recommend a sentence of probation. Ultimately, any sentence imposed would have been up to the judge. At no time did this office ever seek – or ever tell Mr. Swartz’s attorneys that it intended to seek – maximum penalties under the law.
Contrasted with her earlier press release [1].
> AARON SWARTZ, 24, was charged in an indictment with wire fraud, computer fraud, unlawfully obtaining information from a protected computer, and recklessly damaging a protected computer. If convicted on these charges, SWARTZ faces up to 35 years in prison, to be followed by three years of supervised release, restitution, forfeiture and a fine of up to $1 million.
>In this hypothetical scenario, those 10 years in prison would, practically speaking, have consisted of six months for his original crime (the sentence Ortiz actually thought he deserved) plus a nine-and-a-half-year prison term for exercising his constitutional right to a trial.
This is really the core of it. You are punished for daring to exercise your right to a trial. The only solution for this that I've been able to see is to end plea bargains. This, combined with a right to speedy trial, will result in prosecutors only being able to go after a small fraction of the cases they currently pursue. Which means less focus on victim less crimes (assuming the prosecutors have any morals left which is admittingly a dubious assumption).
Why is it so terrible to be punished for exercising your right to trial? Phrased another way, why not offer an incentive for avoiding an expensive trial? The outrageous thing is the 20:1 ratio of punishment risked at trial to plea punishment. Offhand, it seems like there should be a cap of 2:1 or thereabouts on this ratio.
How about for those factually innocent of the charges they face? There should not be a perverse incentive to "plead guilty (to something you did not do), or risk (even with your cap) twice the sentence if you exercise your rights. In this case, it is bad enough to be sentenced to _x_ for a crime you did not commit, and insult to injury to be sentenced to _2x_, let alone _20x_ for having the gall and audacity to demand a trial.
Lesser, but still valid issues may remain when you are indeed guilty, but feel that plea bargaining or sentencing recommendations are out of proportion, unrealistic or whatever. "Hey, contest it. If you lose, you suffer. If you win you suffer, 'less'."
Meanwhile the burden of "expensive" trials, lets be honest, falls largely on the accused, not the state, who has (for all intents and purposes) and unlimited budget (especially at the federal level) - while not strictly accurate, I realize, if there's enough determination, you will suffer that - how often does the government dismiss cases because they are "too expensive to prosecute"? Compare and contrast to the myriad of people who have no option but public defenders.
> how often does the government dismiss cases because they are "too expensive to prosecute"?
Arguably that is what happened to banks that are "too big to jail" (with expenses to both the government and society at large). This does not make the situation seem any better or fairer.
> How about for those factually innocent of the charges they face?
For them, I'm ok leaving the punishment at _1x_. :)
You're not being realistic. Structuring the court system so that the most expensive option to the public is also the option with best expected outcome for the one selecting options is obviously inefficient. And an inefficient justice system is a bad justice system. Many of the problems with the justice system today stem from lack of funding and you're just proposing to make the situation much worse.
>"You're not being realistic. Structuring the court system so that the most expensive option to the public is also the option with best expected outcome for the one selecting options is obviously inefficient. And an inefficient justice system is a bad justice system."
You have to define what you mean by efficiency before you can declare that one system is more efficient than another. I agree that the post you are replying to proposed an expensive system, but it may be more efficient if your efficiency metric takes time spent by innocent people in jail into account as a cost.
That's absolutist, too. If we define a goal of 'zero jailed innocent people', even accepting it as a goal we can likely only ever asymptotically approach, then it shows an impedance mismatch between how to attain this, and the motivations of prosecutors which are not the same, but rather typically, 'show a high and increasing rate of convictions to show a toughness of crime'.
This is not to say that all prosecutors are railroading sociopaths, of course not. But there is a valid question in the sense of "should a prosecutors role be to a) see the guilty punished, or b) to see the most convictions?".
I don't disagree with any of this. My objection with this entire subthread has been the assertion that plea deals violate rights. I find that crazy. When presented with the facts of a case, a good prosecutor and defense attorney will be able to reasonably assess probabilities for the possible verdicts. Hammering out a plea that's around the average outcome can be beneficial to everyone.
I think there should be some onus on the prosecution to show (beyond grand jury levels) some more grounds that they'd reasonably win a case before being allowed to offer a plea deal.
Obviously there's a threshold - how do you do so without a 'mini trial' of sorts (which I get is part of the purpose of the grand jury)? And where the plea deal is initiated by the defendant, then this is waived.
I'm not outright against plea deals. But I do think they are massively overused here in the US, and there needs to be some safeguards that you're not shoehorning someone into something, just to get anything.
No, there's a middle ground. We are also removing people of their liberty. The wholesale use of plea deals (which elsewhere in the world are not allowed, or massively limited) is driven by multiple, flawed priorities:
1) the re-election of DAs and / or prosecutors, and;
2) the desire to minimize the cost of prosecuting cases, with a lack of acknowledgement of the massive disparity in power and little to no concern for those steamrolled in the name of such efficiencies.
Many of today's problems with the justice system do indeed stem from funding issues, but rarely on the prosecutorial side. Instead you have overworked, underpaid public defenders who may many times only meet their clients just before opening statements, even on more complex trials.
Leaving aside the question of zealotry in things like The Innocence Project, many of these cases have issues related to defense ineptitude, not (just) prosecutorial misconduct or misguidance. And by ineptitude, I don't mean active or otherwise incompetence (though there are certainly instances of this), but instead, details and problems that slipped through the cracks because a defendants counsel was too unfamiliar, too overworked to be able to provide the best or necessary defense. Tales abound of missed submission dates, witnesses not interviewed or called, and the like.
If there's funding issues to be found, it's this, rather than 'how do we make the prosecution's life easier/better?'.
There's also just way too much crime for our English common law based system to handle properly, with a jury trial and all. Without going back to original details like executing those convicted of real felonies, which we're too soft to do as of now, not to mention our police/judicial complex is simply not that trustworthy, the current plea bargaining system is probably the best we can do.
And there's the minor detail that US crime has dropped dramatically from its recent peak; per the thesis of Arrest Proof Yourself, without a steady diet of "the clueless" being run through the system on petty crimes at worst, many police units and courthouses would have to lay off people, and that wouldn't do.
My proposal of a 2:1 cap on sought sentence to plea sentence makes the prosecution's life harder, not easier. I think I was pretty clear that I find the present situation with 20:1 ratios wrong.
But I'm troubled by the apparent consensus here that offering plea deals violates a defendant's rights. I find that thinking in terms of rights isn't even helpful. Think in terms of outcomes.
You seem to believe that a bigger portion of the pie should be shifted to public defenders from prosecutors. Fine, I'm not arguing that you're wrong, but the money comes from the same pot. Having an incentive to spare the public the cost of a trial when the defendant acknowledges his own guilt is common sense.
>Why is it so terrible to be punished for exercising your right
Because rights shouldn't come with punishments for using them. This would be like the government being outright allowed to buy the votes from people by means of tax relief if they don't vote (which equates to a tax on those who do vote). Or imagine if the government instituted a tax of $300 per month for having any medium able to communicate (phone, computer with internet access, etc.) but then gave an equal amount tax relief to anyone who agreed to not communicate about certain topics. This would equate a tax on those forms of speech.
I think this point of view is unrealistic and harmful. Look at what happens when you get a speeding ticket. In theory, you have a "right to a trial". But, of course, we can't afford to have everyone who gets a speeding ticket contesting it at trial. That would be prohibitively expensive. So instead, the courts impose hidden costs, making it a pain in the ass to go to trial over a speeding ticket. At best, you win a pyrrhic victory.
I would greatly prefer an honest accounting of my actual rights and the costs associated to using them. I think we would have much better justice system if less lip service was paid to "rights" and more attention was paid to costs and outcomes.
"In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, [...]"
So if everyone started demanding trials for speeding tickets, they would probably just switch them to civil offenses instead of criminal ones, where they already aren't.
>I think we would have much better justice system if less lip service was paid to "rights"
The only solution is for actual service was provided to rights. Anything else is unethical and will justify and necessitate extreme violence to overthrow.
By the time you've said "Why is it so terrible to be punished for exercising your right" I would hope the answer would already be apparent. Being punished for exercising your rights is the opposite of having those rights.
I realize that phrasing is getting me down voted. If I'd phrased it as "Why is it so terrible to be rewarded for not exercising your right", I probably wouldn't be getting down voted. But really, what's the difference?
Indeed, what is the difference? It's just phrasing. So if you can see why it's bad to be punished for exercising your rights, surely you can see why it's bad to be rewarded not to.
I think I've been fairly clear that I find both acceptable. Thinking in terms of "rights" instead of costs and outcomes just increases the chances of a bad decision.
See my sister post. My apologize if you honestly thought that was a useful post. I would certainly not characterize my position as not being in favor of fair trials. But phrasing it terms of rights I do find unhelpful. Doesn't an innocent person have a right not to be jailed? But what's the point of even phrasing it that way?
The point of phrasing things in terms of rights is to set goals for ourselves. We believe that innocent people have the right not to be jailed. Sometimes they are anyway. But not jailing innocent people is one of our goals. Similarly, people don't always get a fair trial, but when we say that we believe people have the right to a fair trial, that means that our goal is for every accused person to have one if they want it.
So, here is my reasoning: you say that you think it's a good idea to punish people for getting a fair trial. If you punish people for something, then it's inherently not a right, because if it's a right then the goal is for everyone to have one if they want it. Thus, you think that people should not have the right to a fair trial.
Note that I asked for clarification rather than just stating that this was your position, because I wasn't sure. So your upset response does not make sense to me.
Further, I don't understand why you find that phrasing to be distasteful, since you seem to be against the notion of phrasing things in terms of "rights" anyway. If you think "rights" are not a useful concept here, why is it wrong to say that you don't believe people should have the right to a fair trial?
I don't think that "rights" is the best framework for evaluating alternative systems. I still understand what you mean when you use the word, though, and obviously I do think the accused should receive fair trials.
The accused don't receive fair trials when they take a plea deal, though. You seem to think that plea deals are a good thing, so did you perhaps mean to say that you think the accused should receive fair trials if they want them? And even then, what if they want them, but they don't want them badly enough to risk the additional punishment you think they ought to receive for getting one?
You seem quite to have, across multiple posts, pushed for the notion that rights get in the way and that our rules should be based on outcomes. Thus it seems natural to suspect that those views also include (be they your own views or be they a set of views for which you are playing devil's advocate) that there isn't a right to fair trial or that even if there is such a right, it should be ignored in favor of better outcomes. (We haven't gotten to the point of deciding what actually counts as outcomes, but it appears that up to now one outcome is low costs, and having unfair trials is a great way to get really low costs).
All decisions should be based on comparing outcomes. Cost is important, but obviously that's only one small part of the outcome. Letting the guilty free is an undesirable outcome (assuming a just law), and jailing the innocent is a terrible outcome. I find the framework of "rights" unhelpful for balancing pros and cons, but the phrasing of the previous post was a very poor paraphrase of that position.
Cost cannot be important. Else those who are costlier to go after are weighted as less important to pursue unless drastic measures are taken to balance out the cost. Someone rich enough to hire a team of lawyers who slow down the process in every legal way possible should not be let off just because they have the money to spend to do such.
And as to the 'framework of rights', this isn't merely a framework by which one operates a legal system but the very foundation of one. If we drop the notion of rights (and the less mentioned but just as important duties) we end up with no system at all.
If we do not have rights (nor duties) then what point is there to a system to is there to ensure my rights are respected (by both the system and by others) and that I perform the duties required of me? We have to start over to ask why we even need a legal system to begin with. It quickly ends up being 'because the guys with guns say so' and any distinction between government and organized crime quickly dissolves.
Consider a simple case of theft. I take your money. Why is this wrong? Because you have a right to do with your money? But we have tossed out rights.
Now if instead you don't mean to toss out all rights, but to eliminate a few that you consider unproductive to our legal system functioning, it is thus quite a fair question to ask which rights are you in favor of tossing. Such as the right to a fair trial. If you want the prosecutor to be able to cheaply lock up guilty people, you can toss the right to a fair trial and then define guilty based off of being declared such. Ergo everyone convicted is guilty and convictions are quite cheap. Even cheaper if we toss the right to counsel. No innocent people locked up and you can put someone in prison in under an hour. Just go up to the jury and say 'we have proof did X, Y, Z', offer up some fabricated evidence, and then offer the jury a forged signed statement from the defendant saying they did it. No cross examination, no actual defense, no need for honesty because the rights to all that has been tossed. And no innocent people are locked up because they are by definition not innocent.
Without the framework of rights, there are cons to balance.
> Consider a simple case of theft... Why is this wrong?
Theft is illegal. Wrong is a different topic.
> any distinction between government and organized crime quickly dissolves.
The difference between organized crime and government has nothing to do with rights. Think about the range of governments that exist.
> If you want the prosecutor to be able to cheaply lock up guilty people, ...
I haven't spelled it out, but the goal of the legal system is to separate the guilty from the innocent. Percentage of innocent punished, percentage of guilty freed, and cost are all factors for evaluating how well the system works.
Rights are a foundation for a legal system in the same way that religion is a foundation for a system of morality. That is, lots of people use them/it as a foundation, but that's neither necessary nor ideal.
Any plea deal should now represent 50% of the maximum fine. So if the prosecution offers a plea deal of 6months, then the best they can get out of a guilty verdict is 1 year.
Make there be a downside to offering a plea deal that is rejected.
I actually think a plea bargain should cap future sentences: if you take the 6 months deal any future case with same charges cannot carry a sentence higher than 6 months.
There are certain areas where you just don't want to do business unless you're connected. Here we have a Pampered Prince, son of President Jimmy Carter's arguably worst Cabinet member (https://en.wikipedia.org/wiki/Cyrus_Vance) who's obviously targeting the vulnerable instead of connected criminals like Jon Corzine of MF Global infamy. I'm sure the Sungs are wondering why they aren't operating in the PRC where the racket is more open and honest (granted, escaping in 1952 was a very good idea, but nowadays...).
Of note, Vance is also the legal genius who decided to carry water for Goldman Sachs, doggedly pursuing the prosecution of Sergey Aleynikov (familiar to those who read Michael Lewis' Flash Boys book) even after his federal case had been completely thrown out. He's also responsible for the Dominique Strauss-Kahn debacle.
Hopefully he'll get some actual opposition in an election soon, he's an embarrassment to the city at this point.
"The prosecution against Abacus appears to be Mr. Vance’s only mortgage-related prosecution against a bank since he won election as Manhattan district attorney and took office in January 2010."
Uhm... I deeply hate pulling the race card, but I would be tempted for this individual. Particularly, when the prosecution's star witness is the fraud master himself.
If I had to guess, it probably had a lot to do with them being relatively weak, small, mostly serving an immigrant community, and having no connection to the local power structure. Going after JP Morgan would be, well...awkward. Going after Abacus was easy.
It's not because Jamie Dimon is white and Thomas Sung is not; that was just a more-or-less inevitable consequence. (In employment law, this is called a "disparate impact".)
It almost seems to me like this one fell into their laps. They might not have been in their sights initially but upon the initial fraud investigation they must have identified a weakness in them. Maybe their willingness to cooperate which I imagine is unheard of in that sector, seemingly?
No, I think he picked them because they didn't contribute to him and were an easy target. Attacking them also wouldn't hurt any of his wealthy friends.
His actual reasoning is sadly irrelevant to how you mount your defense.
I think one possible defense they could use is to insinuate that they were attacked because they are minorities and serve primarily minorities. Its the classic definition of "pulling the race card".
I doubt it was the actual reason, but the actual reason, sadly, is not very important in a PR war in politics.
The article is heavy on narrative, light on facts. The punchline is buried in the middle:
> “When confronted with loan after loan in which the paperwork was allegedly falsified, a grand jury voted to indict the bank and other individuals,” her statement said. “Eight individuals publicly accepted criminal responsibility for their roles in this conspiracy by admitting to crimes they committed while employed in Abacus Bank’s loan department.”
> Abacus lied about applicants, Vance charged, because otherwise its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit. The indictment stated that between 2005 and 2010, Abacus sold hundreds of millions of dollars of fraudulent mortgages to Fannie, reaping many millions of dollars in commissions and fees.
The other article also has descriptions about the "cooperation" missing from the NYT article:
> The Abacus clients whose aborted closing sparked Ken Yu’s termination lost their deposit on the property when the loan fell through. They went to the police and filed a complaint, mentioning that Yu had falsified their mortgage application. The police referred the matter to the DA. Abacus says it had already launched its own inquiry at this point, and that by mid-2010 it had hired two well-regarded fraud consultants, Vitale AML and the Mercadien Group, to do external investigations. The DA’s office declines to specify when its own investigation started, but says the bank only brought in the outside consultants after prosecutors started asking questions.
The NYT article also leaves out the gist of the reason the bank was indicted rather than just the individual employees:
> In April 2011, Yu pled guilty to grand larceny, fraud, and falsifying business records, and is cooperating with the investigation. Six others have also taken pleas. The DA’s argument is that fraud was standard operating procedure at Abacus, that it was taught there, not just tolerated. New employees with no banking knowledge and rudimentary English were instructed that mortgage origination was an act of financial sleight-of-hand: fake gift letters, fake verification of employment forms, blatant misrepresentations on loan application forms. The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung “Raymond” Tam, the loan origination supervisor, who trained the bank’s loan officers and processors. According to the indictment, the two managers “falsely told employees that the exceptionally low default rate of Abacus-originated loans made the underlying accuracy of loan documents insignificant.”
The Bloomberg article relies a lot on quotes from the DA, but many of the underlying facts do not seem seriously disputed. For example:
> The Abacus clients whose aborted closing sparked Ken Yu’s termination lost their deposit on the property when the loan fell through. They went to the police and filed a complaint, mentioning that Yu had falsified their mortgage application. The police referred the matter to the DA.
> its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit.
> In April 2011, Yu pled guilty to grand larceny, fraud, and falsifying business records, and is cooperating with the investigation
> The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung “Raymond” Tam, the loan origination supervisor, who trained the bank’s loan officers and processors
The NYT article in contrast spins this whole utterly irrelevant narrative about an immigrant-founded bank.
Note also that there are two separable questions: 1) why was the bank prosecuted; 2) was the bank guilty. The two questions are related, but distinct. The NYT article is about (1) not (2). What's relevant to (1) is what facts and testimony the prosecutor has available when he decides to prosecute. There was plenty of facts and testimony to justify this prosecution. If this were HSBC instead of a small bank people on HN would be furious if the prosecutor didn't go after the bank with the kind of evidence he had.
The fact that the prosecution ultimately lost does not mean, as the article suggests, that the prosecutor was wrong to bring the case in the first place. If prosecutors could predict what evidence juries would credit at the end of the day, there would be no need for trials.
From everything I see in the Bloomberg article, there would have been a lot of reason to prosecute Yu, but not the bank, as as soon as they saw anything suspicious they acted on it.
But what did the prosecutor do instead? He gave Yu a plea deal to try and indict the bank. Which went no where.
Also from the Bloomberg piece - "But in the wake of the financial crisis only one bank in the whole country has, as an institution, been criminally indicted for mortgage fraud: Abacus."
And that bank was exonerated on every charge.
So what it -looks- like, is a DA's office that wanted to get a high profile case, leaped at the chance to try and pin something on a bank (a small one, that won't have the legal counsel that a large one would have, and won't risk making real enemies), despite having very little to go on, and they couldn't make anything stick.
Or, sure, it could be that this little bitty bank was into some shady stuff but was so good that even though their plan to play nice with the DA early on by turning over info didn't work, they were still able to recover and convince a jury of their innocence. I'm really inclined toward the former though.
The article doesn't suggest that the prosecutor was wrong to bring the case because they lost, but rather because the case they presented was farcical.
The Abacus clients whose aborted closing sparked Ken Yu’s termination lost their deposit on the property when the loan fell through. They went to the police and filed a complaint, mentioning that Yu had falsified their mortgage application. The police referred the matter to the DA.
Besides the unfortunate but I suppose inevitable detail that the applicants lost their deposit to the property owner, nothing new or unacknowledged by the bank.
its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit
The jury, AKA the finders of fact, disagreed with the allegation at the beginning of that snippet, the latter is just gilding the ragweed.
ADDED: as FireBeyond notes, ~30K/year isn't much profit. Per this http://www.ibanknet.com/scripts/callreports/getbank.aspx?ibn... its most current annual net income is 430,000, but that's certainly weighed down by the 10 million the NYT article reports they had to spend defending themselves. So ~30K/year is, as our intuition suspects, minuscule, certainly not "a significant chunk of its profit".
In April 2011, Yu pled guilty to grand larceny, fraud, and falsifying business records, and is cooperating with the investigation
Entirely congruent with the claimed actions and position of the bank, and mentioned in less detail in the NYT article.
The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung “Raymond” Tam, the loan origination supervisor, who trained the bank’s loan officers and processors
Well, yeah, and mentioned to some degree in the NYT article, but, again, the finders of fact disagreed with the prosecutor's allegations.
"> The Abacus clients whose aborted closing sparked Ken Yu’s termination lost their deposit on the property when the loan fell through. They went to the police and filed a complaint, mentioning that Yu had falsified their mortgage application. The police referred the matter to the DA."
See, this is one of those facts that is more disputed than you seem to describe.
Sung noticed discrepancies, multiple checks to be written out, which were incongruous with common practice, called Yu to explain what was going on. She then noticed him outside the branch talking animatedly to the borrowers, and realized something wasn't right, and stopped the finalization of the loan.
"She begun investigating, and found trails of several fraudulent loans. By the following Monday, Yu was fired."
So less than a week from the incident to his dismissal.
Yet to listen to the DA, the bank only acted after the prosecutors began asking questions. Do you see the Manhattan Police and DA turning that (a fraud complaint) around into a criminal investigation into a bank in four business days or less? Or is the bank's story, that yes, this was happening, was discovered and the employee "immediately" terminated (because even for a small bank that's still a quick turn around in investigating financial fraud and falsified business records) actually accurate?
"> its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit."
Yet the article states that the bank only received $120K in servicing fees across all Fannie Mae loans in several years. I'm not sure even a small bank sees $30K/year divided amongst however many mortgages (only a small fraction of which were determined to be fraudulent) as a "significant chunk of profit".
"If this were HSBC instead of a small bank people on HN would be furious if the prosecutor didn't go after the bank with the kind of evidence he had."
Perhaps if HSBC did as this bank did and fire all employees found to be in on this, rather than awarding them bonuses and promotions, people would be a lot less furious?
I'm confused how the indictment is considered facts, but the verdict of the case that resulted from the indictment is merely narrative.
They were exonerated from all charges after trial, wouldn't that make the pre-trial "facts" supplied by the DA/prosecutor the non-factual narrative in this case?
Grand juries are well known for indicting whomever the prosecutor asks them too; I took the quote from the prosecutor about how the grand jury voted to indict as an admission of weakness in his case, because that was literally the least persuasive thing he could have said. "We know the bank did bad things, because I told some people the bank did bad things, and they agreed that I had told them that the bank had done bad things!"
> Abacus sold hundreds of millions of dollars of fraudulent mortgages to Fannie, reaping many millions of dollars in commissions and fees.
Yeah, but from the article: "And what of the prosecutors’ claim that Abacus was driven by greed to conduct the fraud? Figures provided to jurors show the bank has made a modest $123,000 in servicing fees on the loans."
And while you do a good job quoting the prosecutors theory about the bank, it's worth repeating that the jury disagreed pretty thoroughly. At a minimum we can say the prosecution completely failed to prove their theory. And I'd go further: I'd say that the details which have come out bring into question the entire prosecution.
"> In April 2011, Yu pled guilty to grand larceny, fraud, and falsifying business records, and is cooperating with the investigation."
He was the first one found to be doing these things, and was also fired before any of this saw the light of a courtroom, because of suspicions raised by the bank, not the aggrieved mortgagees. He has no possible incentive to spin himself as a mere pawn, whatsoever. /s
"The DA’s argument is that fraud was standard operating procedure at Abacus, that it was taught there, not just tolerated."
Of course that was the DA's argument. The jury disagreed pretty vehemently, however (and whatever the NYT's 'spin' on 'small independent immigrant bank doing its best' is, let's face it, most people are going to be looking for 'greedy bank' when called to judge the situation of mortgage origination fraud).
I think Bloomberg's article just got the DA side of the story which of course will try to put Abacus in the worst light possible. It could have been intentional or maybe Abacus lawyers chose not to discuss the ongoing case with the press and speak with their legal filings instead.
It's usually easier to prosecute a small fish than tackle a great white bank with their armies of lawyers. Thankfully the jury saw through the whole thing. I love the "escrow account" which was nothing more than a slush fund for the prosecutor's office. Now we know that Law & Order was fake, clearly this guy is not Sam Waterston.
I think L&O:CI is actually to blame: everybody thought they were voting for Courtney B. Vance, but instead they got Cyrus R. Vance, who obviously isn't as talented.
81 comments
[ 3.4 ms ] story [ 149 ms ] threadAnd, the DA's was going to manage the $2M collateral? What a sham!
False convictions happen. So now it's just a question of taking the known cost now, or a gamble on a much higher cost after the trial.
Very bad situation, this.
Being thrown charges until something sticks is akin to being interrogated until something / anything damning is found against you - an inquisition.
It's not shifting perceived risk, it's shifting real risk. If you're not charged for something, you're probably (right? correct me if I'm wrong?) not going to get convicted for it. If you /are/ charged for something, there's a chance you're going to get convicted for it.
Terrible things don't mostly happen because people are monsters, they happen because people are apathetic to others' problems and value their own convenience and gain above all else.
Can't speak to local DAs in bumfuck eygpt. Maybe they are trying to avoid losing by any means necessary.
TFA seems to illustrate the opposite.
The real effect is simply a much harsher one: If you're poor you're going to jail, guilty or not and if you're wealthy you can afford to defend.
The employees in question were highly placed: "The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung 'Raymond' Tam, the loan origination supervisor, who trained the bank’s loan officers and processors."
This isn't a case where you have to connect a chain of events between a third-world branch of a megabank all the way to someone who matters. It's neat and self-contained, and easy for a jury to understand.
And the bank is (fortunately) wealthy enough to defend itself. That of course did not stop the prosecutor from going after the employees.
Really. Bank discovers internal fraud, goes after the main perpetrator who then turns star witness for the prosecution. It's a giant mess with the prosecutors having considerable egg on their face.
The relevant sentence in the article is:
"Facing indictment and the threat of long prison sentences, eight Abacus loan department employees entered guilty pleas and agreed to cooperate with the district attorney’s investigation."
So according to the article it was the threat of long prison sentences that caused them to enter guilty pleas, not that they were in any way found guilty after a trial.
In short: there was no trial, so whether or not the case against them would fall apart if there had been remains to be seen.
But the article strongly suggests that the main culprit set up underlings to defer to his higher authority. That makes them a lot less culpable than the indictment would make you believe.
If anything, the prosecutor's loss highlights why prosecutors haven't gone after the big banks. If they can't even get a conviction with multiple loan department employees pleading guilty and testifying on behalf of the prosecution, imagine going after a big bank, where the link between the wrongdoing and the central command will be far more tenuous.
The malfeasant employee seems to have joined the prosecution against the bank only to relieve the pressure on himself and to distract attention (when in my opinion he should have been the one charged and the bank should have been commended on their handling of the case).
The other employees may have been negligent but do not appear to be malicious, if it wasn't for the alert eye of the director this could have gone on for a lot longer.
All in all this case seems to be a net loss for everybody.
What HSBC did went - as far as we can see from the outside - right to the top and required a lot more than a rogue employee.
It does not look like a single "rogue employee" but multiple employees in the department. Of course that doesn't mean anyone at the top is to blame, but one can see why the prosecutor would draw that inference.
> What HSBC did went - as far as we can see from the outside - right to the top and required a lot more than a rogue employee.
What about HSBC went to the top? The only thing from the indictment that was a policy from the top was not classifying Mexico as a "high risk" country for money laundering controls purposes. There wasn't even a "single loan officer . . . [who] joined the prosecution against the bank only to relieve the pressure on himself" willing to testify that a higher up made that classification decision with specific intent to profit from money laundering.
If there had been a witness like Mr. Yu in the HSBC case, the government would've settled for a lot more than it did.
http://www.law360.com/articles/419166/the-most-unlikely-fina...
I suspect the real reason is the quote at the bottom of the page:
"Vance — and by extension, New York’s entire state and federal regulatory regime — gain credibility for their tough stance against an allegedly sketchy institution. The mere indictment builds political capital, regardless of whether there’s any factual basis for their claims."
In other words: this case was brought to Enhance Vance's stature, not because of the gravity of the case.
Yu's supervisor was as far as I understand the case the only other person that should have faced charges, the rest is either operating on instruction from Yu or simply did not know about it and did the right thing once the situation came to light.
Yu's supervisor should have probably caught this in an earlier stage, it went on for too long.
Quoted from the Forbes article:
> If Ortiz thought Swartz only deserved to spend 6 months in jail, why did she charge him with crimes carrying a maximum penalty of 50 years? It’s a common way of gaining leverage during plea bargaining. Had Swartz chosen to plead not guilty, the offer of six months in jail would have evaporated. Upon conviction, prosecutors likely would have sought the maximum penalty available under the law. And while the judge would have been unlikely to sentence him to the full 50 years, it’s not hard to imagine him being sentenced to 10 years.
> In this hypothetical scenario, those 10 years in prison would, practically speaking, have consisted of six months for his original crime (the sentence Ortiz actually thought he deserved) plus a nine-and-a-half-year prison term for exercising his constitutional right to a trial.
[0]: http://www.thecrimereport.org/viewpoints/2014-01-how-plea-ba...
[1]: http://www.forbes.com/sites/timothylee/2013/01/17/aaron-swar...
There are federal sentencing guidelines, which are almost always used. It's a matrix and you can know pretty much what you face if you are found guilty.
It's also not correct to label a plea deal as what the prosecution thought they deserved. They factor in the cost of trial and probability of success. It's like any negotiation.
It's true that a plea deal is not what the prosecution `thought they deserved'. Too often, it's whatever they think that can get the defendant to agree to, and has little connection to justice.
The particulars of the Swartz case were meant to be indicative of the larger problem, and he certainly had access to good legal counsel. Nevertheless, that 6 months quote comes from the prosecutors press release [0]:
> The prosecutors recognized that there was no evidence against Mr. Swartz indicating that he committed his acts for personal financial gain, and they recognized that his conduct – while a violation of the law – did not warrant the severe punishments authorized by Congress and called for by the Sentencing Guidelines in appropriate cases. That is why in the discussions with his counsel about a resolution of the case this office sought an appropriate sentence that matched the alleged conduct – a sentence that we would recommend to the judge of six months in a low security setting. While at the same time, his defense counsel would have been free to recommend a sentence of probation. Ultimately, any sentence imposed would have been up to the judge. At no time did this office ever seek – or ever tell Mr. Swartz’s attorneys that it intended to seek – maximum penalties under the law.
Contrasted with her earlier press release [1].
> AARON SWARTZ, 24, was charged in an indictment with wire fraud, computer fraud, unlawfully obtaining information from a protected computer, and recklessly damaging a protected computer. If convicted on these charges, SWARTZ faces up to 35 years in prison, to be followed by three years of supervised release, restitution, forfeiture and a fine of up to $1 million.
[0]: https://www.techdirt.com/articles/20130117/02090421710/carme...
[1]: http://web.archive.org/web/20140625220211/http://www.justice...
(Link to archive as the page has since been taken down)
Also bonus reading on the connection to mandatory sentencing laws exacerbating this process:
[2]: http://www.nytimes.com/2011/09/26/us/tough-sentences-help-pr...
This is really the core of it. You are punished for daring to exercise your right to a trial. The only solution for this that I've been able to see is to end plea bargains. This, combined with a right to speedy trial, will result in prosecutors only being able to go after a small fraction of the cases they currently pursue. Which means less focus on victim less crimes (assuming the prosecutors have any morals left which is admittingly a dubious assumption).
Lesser, but still valid issues may remain when you are indeed guilty, but feel that plea bargaining or sentencing recommendations are out of proportion, unrealistic or whatever. "Hey, contest it. If you lose, you suffer. If you win you suffer, 'less'."
Meanwhile the burden of "expensive" trials, lets be honest, falls largely on the accused, not the state, who has (for all intents and purposes) and unlimited budget (especially at the federal level) - while not strictly accurate, I realize, if there's enough determination, you will suffer that - how often does the government dismiss cases because they are "too expensive to prosecute"? Compare and contrast to the myriad of people who have no option but public defenders.
Arguably that is what happened to banks that are "too big to jail" (with expenses to both the government and society at large). This does not make the situation seem any better or fairer.
For them, I'm ok leaving the punishment at _1x_. :)
You're not being realistic. Structuring the court system so that the most expensive option to the public is also the option with best expected outcome for the one selecting options is obviously inefficient. And an inefficient justice system is a bad justice system. Many of the problems with the justice system today stem from lack of funding and you're just proposing to make the situation much worse.
You have to define what you mean by efficiency before you can declare that one system is more efficient than another. I agree that the post you are replying to proposed an expensive system, but it may be more efficient if your efficiency metric takes time spent by innocent people in jail into account as a cost.
This is not to say that all prosecutors are railroading sociopaths, of course not. But there is a valid question in the sense of "should a prosecutors role be to a) see the guilty punished, or b) to see the most convictions?".
Obviously there's a threshold - how do you do so without a 'mini trial' of sorts (which I get is part of the purpose of the grand jury)? And where the plea deal is initiated by the defendant, then this is waived.
I'm not outright against plea deals. But I do think they are massively overused here in the US, and there needs to be some safeguards that you're not shoehorning someone into something, just to get anything.
1) the re-election of DAs and / or prosecutors, and;
2) the desire to minimize the cost of prosecuting cases, with a lack of acknowledgement of the massive disparity in power and little to no concern for those steamrolled in the name of such efficiencies.
Many of today's problems with the justice system do indeed stem from funding issues, but rarely on the prosecutorial side. Instead you have overworked, underpaid public defenders who may many times only meet their clients just before opening statements, even on more complex trials.
Leaving aside the question of zealotry in things like The Innocence Project, many of these cases have issues related to defense ineptitude, not (just) prosecutorial misconduct or misguidance. And by ineptitude, I don't mean active or otherwise incompetence (though there are certainly instances of this), but instead, details and problems that slipped through the cracks because a defendants counsel was too unfamiliar, too overworked to be able to provide the best or necessary defense. Tales abound of missed submission dates, witnesses not interviewed or called, and the like.
If there's funding issues to be found, it's this, rather than 'how do we make the prosecution's life easier/better?'.
And there's the minor detail that US crime has dropped dramatically from its recent peak; per the thesis of Arrest Proof Yourself, without a steady diet of "the clueless" being run through the system on petty crimes at worst, many police units and courthouses would have to lay off people, and that wouldn't do.
But I'm troubled by the apparent consensus here that offering plea deals violates a defendant's rights. I find that thinking in terms of rights isn't even helpful. Think in terms of outcomes.
You seem to believe that a bigger portion of the pie should be shifted to public defenders from prosecutors. Fine, I'm not arguing that you're wrong, but the money comes from the same pot. Having an incentive to spare the public the cost of a trial when the defendant acknowledges his own guilt is common sense.
Because rights shouldn't come with punishments for using them. This would be like the government being outright allowed to buy the votes from people by means of tax relief if they don't vote (which equates to a tax on those who do vote). Or imagine if the government instituted a tax of $300 per month for having any medium able to communicate (phone, computer with internet access, etc.) but then gave an equal amount tax relief to anyone who agreed to not communicate about certain topics. This would equate a tax on those forms of speech.
I would greatly prefer an honest accounting of my actual rights and the costs associated to using them. I think we would have much better justice system if less lip service was paid to "rights" and more attention was paid to costs and outcomes.
"In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, [...]"
So if everyone started demanding trials for speeding tickets, they would probably just switch them to civil offenses instead of criminal ones, where they already aren't.
The only solution is for actual service was provided to rights. Anything else is unethical and will justify and necessitate extreme violence to overthrow.
So, here is my reasoning: you say that you think it's a good idea to punish people for getting a fair trial. If you punish people for something, then it's inherently not a right, because if it's a right then the goal is for everyone to have one if they want it. Thus, you think that people should not have the right to a fair trial.
Note that I asked for clarification rather than just stating that this was your position, because I wasn't sure. So your upset response does not make sense to me.
Further, I don't understand why you find that phrasing to be distasteful, since you seem to be against the notion of phrasing things in terms of "rights" anyway. If you think "rights" are not a useful concept here, why is it wrong to say that you don't believe people should have the right to a fair trial?
And as to the 'framework of rights', this isn't merely a framework by which one operates a legal system but the very foundation of one. If we drop the notion of rights (and the less mentioned but just as important duties) we end up with no system at all.
If we do not have rights (nor duties) then what point is there to a system to is there to ensure my rights are respected (by both the system and by others) and that I perform the duties required of me? We have to start over to ask why we even need a legal system to begin with. It quickly ends up being 'because the guys with guns say so' and any distinction between government and organized crime quickly dissolves.
Consider a simple case of theft. I take your money. Why is this wrong? Because you have a right to do with your money? But we have tossed out rights.
Now if instead you don't mean to toss out all rights, but to eliminate a few that you consider unproductive to our legal system functioning, it is thus quite a fair question to ask which rights are you in favor of tossing. Such as the right to a fair trial. If you want the prosecutor to be able to cheaply lock up guilty people, you can toss the right to a fair trial and then define guilty based off of being declared such. Ergo everyone convicted is guilty and convictions are quite cheap. Even cheaper if we toss the right to counsel. No innocent people locked up and you can put someone in prison in under an hour. Just go up to the jury and say 'we have proof did X, Y, Z', offer up some fabricated evidence, and then offer the jury a forged signed statement from the defendant saying they did it. No cross examination, no actual defense, no need for honesty because the rights to all that has been tossed. And no innocent people are locked up because they are by definition not innocent.
Without the framework of rights, there are cons to balance.
Theft is illegal. Wrong is a different topic.
> any distinction between government and organized crime quickly dissolves.
The difference between organized crime and government has nothing to do with rights. Think about the range of governments that exist.
> If you want the prosecutor to be able to cheaply lock up guilty people, ...
I haven't spelled it out, but the goal of the legal system is to separate the guilty from the innocent. Percentage of innocent punished, percentage of guilty freed, and cost are all factors for evaluating how well the system works.
Rights are a foundation for a legal system in the same way that religion is a foundation for a system of morality. That is, lots of people use them/it as a foundation, but that's neither necessary nor ideal.
Any plea deal should now represent 50% of the maximum fine. So if the prosecution offers a plea deal of 6months, then the best they can get out of a guilty verdict is 1 year.
Make there be a downside to offering a plea deal that is rejected.
http://www.nybooks.com/articles/archives/2014/nov/20/why-inn...
Hopefully he'll get some actual opposition in an election soon, he's an embarrassment to the city at this point.
Uhm... I deeply hate pulling the race card, but I would be tempted for this individual. Particularly, when the prosecution's star witness is the fraud master himself.
If I had to guess, it probably had a lot to do with them being relatively weak, small, mostly serving an immigrant community, and having no connection to the local power structure. Going after JP Morgan would be, well...awkward. Going after Abacus was easy.
It's not because Jamie Dimon is white and Thomas Sung is not; that was just a more-or-less inevitable consequence. (In employment law, this is called a "disparate impact".)
His actual reasoning is sadly irrelevant to how you mount your defense.
I doubt it was the actual reason, but the actual reason, sadly, is not very important in a PR war in politics.
> “When confronted with loan after loan in which the paperwork was allegedly falsified, a grand jury voted to indict the bank and other individuals,” her statement said. “Eight individuals publicly accepted criminal responsibility for their roles in this conspiracy by admitting to crimes they committed while employed in Abacus Bank’s loan department.”
A different article has more details on the indictment: http://www.bloomberg.com/bw/articles/2013-01-31/mortgage-fra....
> Abacus lied about applicants, Vance charged, because otherwise its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit. The indictment stated that between 2005 and 2010, Abacus sold hundreds of millions of dollars of fraudulent mortgages to Fannie, reaping many millions of dollars in commissions and fees.
The other article also has descriptions about the "cooperation" missing from the NYT article:
> The Abacus clients whose aborted closing sparked Ken Yu’s termination lost their deposit on the property when the loan fell through. They went to the police and filed a complaint, mentioning that Yu had falsified their mortgage application. The police referred the matter to the DA. Abacus says it had already launched its own inquiry at this point, and that by mid-2010 it had hired two well-regarded fraud consultants, Vitale AML and the Mercadien Group, to do external investigations. The DA’s office declines to specify when its own investigation started, but says the bank only brought in the outside consultants after prosecutors started asking questions.
The NYT article also leaves out the gist of the reason the bank was indicted rather than just the individual employees:
> In April 2011, Yu pled guilty to grand larceny, fraud, and falsifying business records, and is cooperating with the investigation. Six others have also taken pleas. The DA’s argument is that fraud was standard operating procedure at Abacus, that it was taught there, not just tolerated. New employees with no banking knowledge and rudimentary English were instructed that mortgage origination was an act of financial sleight-of-hand: fake gift letters, fake verification of employment forms, blatant misrepresentations on loan application forms. The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung “Raymond” Tam, the loan origination supervisor, who trained the bank’s loan officers and processors. According to the indictment, the two managers “falsely told employees that the exceptionally low default rate of Abacus-originated loans made the underlying accuracy of loan documents insignificant.”
And on the opposite side is a myriad of proceedings, of which the bank was exonerated, on every. single. charge.
> The Abacus clients whose aborted closing sparked Ken Yu’s termination lost their deposit on the property when the loan fell through. They went to the police and filed a complaint, mentioning that Yu had falsified their mortgage application. The police referred the matter to the DA.
> its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit.
> In April 2011, Yu pled guilty to grand larceny, fraud, and falsifying business records, and is cooperating with the investigation
> The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung “Raymond” Tam, the loan origination supervisor, who trained the bank’s loan officers and processors
The NYT article in contrast spins this whole utterly irrelevant narrative about an immigrant-founded bank.
Note also that there are two separable questions: 1) why was the bank prosecuted; 2) was the bank guilty. The two questions are related, but distinct. The NYT article is about (1) not (2). What's relevant to (1) is what facts and testimony the prosecutor has available when he decides to prosecute. There was plenty of facts and testimony to justify this prosecution. If this were HSBC instead of a small bank people on HN would be furious if the prosecutor didn't go after the bank with the kind of evidence he had.
The fact that the prosecution ultimately lost does not mean, as the article suggests, that the prosecutor was wrong to bring the case in the first place. If prosecutors could predict what evidence juries would credit at the end of the day, there would be no need for trials.
But what did the prosecutor do instead? He gave Yu a plea deal to try and indict the bank. Which went no where.
Also from the Bloomberg piece - "But in the wake of the financial crisis only one bank in the whole country has, as an institution, been criminally indicted for mortgage fraud: Abacus."
And that bank was exonerated on every charge.
So what it -looks- like, is a DA's office that wanted to get a high profile case, leaped at the chance to try and pin something on a bank (a small one, that won't have the legal counsel that a large one would have, and won't risk making real enemies), despite having very little to go on, and they couldn't make anything stick.
Or, sure, it could be that this little bitty bank was into some shady stuff but was so good that even though their plan to play nice with the DA early on by turning over info didn't work, they were still able to recover and convince a jury of their innocence. I'm really inclined toward the former though.
Besides the unfortunate but I suppose inevitable detail that the applicants lost their deposit to the property owner, nothing new or unacknowledged by the bank.
its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit
The jury, AKA the finders of fact, disagreed with the allegation at the beginning of that snippet, the latter is just gilding the ragweed.
ADDED: as FireBeyond notes, ~30K/year isn't much profit. Per this http://www.ibanknet.com/scripts/callreports/getbank.aspx?ibn... its most current annual net income is 430,000, but that's certainly weighed down by the 10 million the NYT article reports they had to spend defending themselves. So ~30K/year is, as our intuition suspects, minuscule, certainly not "a significant chunk of its profit".
In April 2011, Yu pled guilty to grand larceny, fraud, and falsifying business records, and is cooperating with the investigation
Entirely congruent with the claimed actions and position of the bank, and mentioned in less detail in the NYT article.
The accused employees include Yiu Wah Wong, the bank’s chief credit officer, who reported directly to Jill Sung; and Wai Hung “Raymond” Tam, the loan origination supervisor, who trained the bank’s loan officers and processors
Well, yeah, and mentioned to some degree in the NYT article, but, again, the finders of fact disagreed with the prosecutor's allegations.
See, this is one of those facts that is more disputed than you seem to describe.
Sung noticed discrepancies, multiple checks to be written out, which were incongruous with common practice, called Yu to explain what was going on. She then noticed him outside the branch talking animatedly to the borrowers, and realized something wasn't right, and stopped the finalization of the loan.
"She begun investigating, and found trails of several fraudulent loans. By the following Monday, Yu was fired."
So less than a week from the incident to his dismissal.
Yet to listen to the DA, the bank only acted after the prosecutors began asking questions. Do you see the Manhattan Police and DA turning that (a fraud complaint) around into a criminal investigation into a bank in four business days or less? Or is the bank's story, that yes, this was happening, was discovered and the employee "immediately" terminated (because even for a small bank that's still a quick turn around in investigating financial fraud and falsified business records) actually accurate?
"> its loans wouldn’t have met Fannie Mae’s income requirements, and the bank depended on Fannie’s money for a significant chunk of its profit."
Yet the article states that the bank only received $120K in servicing fees across all Fannie Mae loans in several years. I'm not sure even a small bank sees $30K/year divided amongst however many mortgages (only a small fraction of which were determined to be fraudulent) as a "significant chunk of profit".
"If this were HSBC instead of a small bank people on HN would be furious if the prosecutor didn't go after the bank with the kind of evidence he had."
Perhaps if HSBC did as this bank did and fire all employees found to be in on this, rather than awarding them bonuses and promotions, people would be a lot less furious?
They were exonerated from all charges after trial, wouldn't that make the pre-trial "facts" supplied by the DA/prosecutor the non-factual narrative in this case?
> Abacus sold hundreds of millions of dollars of fraudulent mortgages to Fannie, reaping many millions of dollars in commissions and fees.
Yeah, but from the article: "And what of the prosecutors’ claim that Abacus was driven by greed to conduct the fraud? Figures provided to jurors show the bank has made a modest $123,000 in servicing fees on the loans."
And while you do a good job quoting the prosecutors theory about the bank, it's worth repeating that the jury disagreed pretty thoroughly. At a minimum we can say the prosecution completely failed to prove their theory. And I'd go further: I'd say that the details which have come out bring into question the entire prosecution.
He was the first one found to be doing these things, and was also fired before any of this saw the light of a courtroom, because of suspicions raised by the bank, not the aggrieved mortgagees. He has no possible incentive to spin himself as a mere pawn, whatsoever. /s
"The DA’s argument is that fraud was standard operating procedure at Abacus, that it was taught there, not just tolerated."
Of course that was the DA's argument. The jury disagreed pretty vehemently, however (and whatever the NYT's 'spin' on 'small independent immigrant bank doing its best' is, let's face it, most people are going to be looking for 'greedy bank' when called to judge the situation of mortgage origination fraud).